Renewable and Sustainable Energy Reviews 16 (2012) 5660–5677

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Renewable and Sustainable Energy Reviews

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journal homepage: www.elsevier.com/locate/rser

Managing electric power system transition in China

Jiahai Yuan a,n, Yan Xu a, Zhen Hu b,nn, Zhongfu Yu a, Jiangyan Liu a, Zhaoguang Hu c, Ming Xu d,nn

a School of Economics and Management, North China Electric Power University, Beijing 102206, Chinab Centre for Energy and Environmental Policy, University of Delaware, DE, USAc State Grid Energy Research Institute, State Grid, Chinad School of Natural Resources and Environment, University of Michigan, Ann Arbor, MI, USA

a r t i c l e i n f o

Article history:

Received 23 May 2011

Received in revised form

24 May 2012

Accepted 26 May 2012Available online 4 August 2012

Keywords:

Multi-level perspective

Energy transition management

China

Power systems

21/$ - see front matter & 2012 Elsevier Ltd. A

x.doi.org/10.1016/j.rser.2012.05.046

esponding author. Tel.: þ86 10 51963451.

responding authors.

ail addresses: yuanjh126@126.com (J. Yuan),

a b s t r a c t

This research studies the low carbon transition of the electric power sector in China using a multi-level

perspective (MLP) of niches, socio-technical regime, and landscape, as well as literature on innova-

tion systems. Three lines of thought on transition process are integrated in the paper to probe

the possible transition pathways in China. A MLP analysis is presented to understand the current

niches, regime, and landscape of China’s power sector. A brief analysis on the future macroscopic

socio-economic transition in the process of industrialization, urbanization, and modernization of

Chinese society and its implication on power landscape are depicted to prove the urgency and

magnitude of transition in China and why systematic transition management is needed. Five transi-

tion pathways, namely reproduction, transformation, substitution, reconfiguration, de-alignment/

re-alignment, and reconfiguration, with their possible technology options are presented. The paper

goes further to propose an interactive framework for managing the transition to a low carbon energy

system in China. Representative technology options are appraised by employing innovation theory

to indicate the logic of policymaking within the framework. Institutional gaps in realizing the transi-

tion are also addressed. The work presented in the paper will be useful in informing policy-makers

and other stakeholders and may provide references for power sector transition management in

other countries.

& 2012 Elsevier Ltd. All rights reserved.

Contents

1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5661

2. Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5661

2.1. Multi-level perspective for socio-technical transition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5661

2.2. Transition pathway . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5662

2.3. Our approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5662

3. Current power landscape and niche in China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5663

3.1. Brief history of power systems development in China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5663

3.2. Overall picture of China’s power systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5664

3.3. MLP analysis of power system in China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5666

3.3.1. Power landscape and regime in China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5666

3.3.2. Technology niches . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5667

4. Pathways towards low carbon power system in China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5668

4.1. Landscape prospect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5668

4.2. Possible pathways . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5670

5. Policy design implications for transition management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5671

5.1. Basic assumptions on policy design . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5671

5.2. Policy design implications for China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5672

5.3. Potential institutional gaps for transitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5674

ll rights reserved.

brucehu06@googlemail.com (Z. Hu), mingxu@umich.edu (M. Xu).

J. Yuan et al. / Renewable and Sustainable Energy Reviews 16 (2012) 5660–5677 5661

6. Concluding remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5676

Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5676

References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5676

1. Introduction

Under the background of global transition to a low carboneconomy, energy system in China has recently aroused ferventattention. The literature addressing low carbon energy develop-ment in China recently can be classified into two main lines,policy study [1–9,amongothers] and modeling/scenario study[10–16,amongothers]. The focus of policy research is on thepotential of various low carbon options and the appropriatepolicies to facilitate their deployment. On the other side, theemphasis of modeling/scenario study is on the structure and logicof the underlying models and all possible low carbon pathways,without much concern on how these low carbon niches candevelop into the mainstream of the energy system. With theseefforts, different versions of a sustainable energy future for Chinaare portrayed and viable policies are recommended, thus addingto our understanding of energy issue for China, the largest energyconsumer and GHG emitter, as well as the most populousdeveloping country in the world. While modeling/scenario studymainly deals with ‘‘where to go’’ and policy study deals with‘‘what to do’’, there is still a gap between them, that is ‘‘why andhow to do’’. Particularly, transition from a heavily coal-dependenteconomy to a low carbon one with significant improvements inenergy efficiency under globalization, industrialization, and urba-nization in China is tremendously difficult. A lot of interlockedfactors such as economic structure, urbanization, and transporta-tion system, should be proactively managed.

Though energy transition has been extensively studiedrecently, the magnitude and complexity of the challenge havenot yet been widely recognized. As noted by Larsson [17, p. 1],‘‘The transformation of existing energy systems to sustainable and

renewable alternatives represents a tremendous management chal-

lenge. We need to view it as an opportunity to renew energy systems

and renew important parts of the economy and social life y So far,primarily the technical aspects of different alternatives have been

debated. We know a lot about ‘what’ has to change. So far, however,very little has been written about the ‘how’ of the change process’’.

Recently there are a few authors employing a multi-levelperspective (MLP) framework in a combination of technical, socialand historical analysis, sometimes elaborated by system innovationand co-evolutionary viewpoints in energy research literature[18–29]. While some of the authors have addressed specific casesfor developed countries like the UK and the Netherlands [22,24–25]and some general cases for developing countries [30], others haveaddressed the history and general trends of the energy systems[31,32]. In this research, the following questions are of particularinterests: ‘‘What is the character of the particular socio-technicallandscape that shapes the energy system in one country?’’; ‘‘Whatare the main challenges under sustainability transition?’’; ‘‘How canthe potential improvements within the current technical regime andthe novel niches begin to break the current regime?’’; ‘‘What is theproper policy (if any) that can facilitate the transition?’’. By focusingon these issues, these researchers provide a promising new directionfor energy system transition study.

China is in a process of rapid industrialization, urbanizationand modernization, which distinguishes itself with its industria-lized counterparts. A variety of macroscopic factors will exertimplicit or explicit impacts on energy system transformations.In this sense MLP is an appropriate methodology for addressingChina’s energy system transition. This research is such an attempt

to employ this new method to study China’s power systemstransition. It is worth noticing that, as a field far from being maturity,there is an ongoing fiery dispute on whether purposeful governancefor sustainable development and deliberate policy aiming to trans-form regimes is possible [26]. Leaving aside the theoretical dispute,we insist that a well designed set of vision, policy and plans will farebetter for delivering sustainable transition.

The layout of the paper is as follows: the Methodology sectionintroduces the methodology for the study; the Current powerlandscape and niche in China section discusses the current land-scape of the power sector in China and the niche technologyoptions for the low carbon transition; the Pathways towards lowcarbon power system in China section discusses the possiblepathways for transition and the underlying challenges; the Policydesign implications for transition management section discussesthe management framework for transition; and the Concludingremarks section is the concluding remarks.

2. Methodology

2.1. Multi-level perspective for socio-technical transition

In seeking to develop transition pathways for China’s powersector, strongly encouraged by call for an organized plan forenergy transition [17,24], we are motivated by the desire fromstakeholders for conceptual frameworks that enable the exam-ination of plausible future pathways to inform decision-making.Actors are increasingly driven by the need of keeping theeconomy growing while reducing carbon emissions. This impliesradical and disruptive changes to be achieved while maintaining‘secure’ energy supplies and meeting ‘reasonable’ energy servicedemands at ‘affordable’ costs. Previous work largely focuses ontechnically plausible futures and their likely costs and benefits,often using modeling approaches that assume a high level ofeconomic rationality of the actors. Despite its useful insights, suchwork does not illuminate how technological changes arisethrough the dynamic interactions between a range of actors withdifferent perspectives and goals. Their decisions and behavior arelikely to be key influences on how to get from ‘here’ to a radicallydifferent low carbon ‘there’—and need to be understood ifeffective policy strategies and instruments are to be developed.Our starting point is that frameworks developed to examine pastsystem transitions and guide the management of future transi-tions could usefully be applied to understanding the changingroles, influences and opportunities of actors, both large and small,in the dynamics of future energy transitions.

Our approach is built on the multi-level perspective (MLP) foranalyzing the dynamics of transitions, developed primarily by Dutchresearchers [18–21]. This method combines technical, social andhistorical analysis and insights into past and current transitions,using an analytical framework based on interactions among threelevels: technological niches, socio-technical regimes, and landscapes.In particular, landscape represents the broader political, social andcultural values and institutions that form the deep structuralrelationships of a society and only change slowly. The socio-technical regime reflects the prevailing set of routines or practicesthat ‘actors’ and institutions use and that create and reinforce aparticular technological system, including ‘‘engineering practices;production process technologies; product characteristics, skills and

J. Yuan et al. / Renewable and Sustainable Energy Reviews 16 (2012) 5660–56775662

procedures [y] embedded in institutions and infrastructures’’ [18].Whereas the existing regime generates incremental innovation,radical innovations are generated in niches, which are spaces thatare at least partially insulated from ‘normal’ market selection in theregime, for example, specialized sectors or market locations. Nichesprovide places for learning processes to occur, and space to build upthe social networks that support innovations, such as supply chainsand user–producer relationships. Transition pathways arise throughthe dynamic interaction of technological and social factors at andbetween these different levels.

The transitions study approach has developed along threemain lines, namely historical description, transition management,and scenario development. In the first line, developed mainly bythe Dutch researchers, the MLP is used to provide a framework forexplaining historical dynamics. For example, [22] analyzes thehistorical dynamics within the Dutch electricity system from1960 to 2004. Ref. [23] analyzes the changes that have takenplace in the UK’s energy system over the past several decades. Thesecond line is interested in the creation of a ‘transition arena’ for arelatively small group of innovation-oriented stakeholders toengage in social learning about future possibilities and opportu-nities. The third is interested in creating a scenario which canexplores potential links between various options and analyzedhow these developments affect and are affected by the strategies(including policies) and behavior of various stakeholders [27](see [26] for more details). Similar to [24], our theoreticalapproach to developing transition pathways is an elaboration ofthe socio-technical scenarios method, augmented by recentthinking in innovation systems research. The theoretical basisfor linking these different methodologies, which builds on thework of [28] and further elaborated by [26], is described briefly inthe next section (see [29] for more details). In a similar fashion,Mitchell [33] also highlights the importance of the regulatoryparadigm and the wider socio-political landscapes and theirimpact on delivering energy system change, emphasizing theinfluence of a regulatory state paradigm (similar to landscape inMLP literature) and policies regulating stakeholder behaviors.

2.2. Transition pathway

Regarding transition pathway, different authors have proposeddifferent topology depending on whether they believe transition ismanageable or not. In the school of Transition Management, [34]understands regime change to be a function of two processes:(1) shifting selection pressures on the regime, (2) the coordinationof resources available inside and outside the regime to adapt tothese pressures. Selection pressures consist of economic pressures(competition, taxes, charges, and regulations), broad political, socialand economic ‘landscape’ developments, and pressures that ‘‘bubble

up from innovative niches that are not yet so established as to constitute

a regime’’. In their understanding ‘‘without at least some form of

internal or external pressure in the diverse senses discussed above, it is

unlikely that substantive change to the developmental trajectory of the

regime will result’’. For adaptation they distinguish two dimensions:(1) availability of resources (factor endowments, capabilities, knowl-edge) and (2) degree of coordination of resource deployment.Assuming that selection pressures are always present, [34,35]combine the two adaptation dimensions to construct a typology offour transitions.

According to [35], ‘endogenous renewal’ results from regimeactors making conscious and planned efforts in response to per-ceived pressures, using regime-internal resources. ‘Reorientation oftrajectories’ results from a shock either inside or outside theincumbent regime, followed by a response from regime actors usinginternal resources. ‘Emergent transformation’ arises from uncoordi-nated pressures, outside the regime, often driven by small and new

firms. ‘Purposive transitions’ are intended and coordinated changeprocesses that emerge from outside the existing regime. Purposivetransitions are seen as ‘‘deliberately intended and pursued from theoutset to reflect an explicit set of societal expectations or interests’’.

Another line also in the school of Transition Management,inspired by Cultural Theory [36], argues that there are threeexperiencable patterns of social relationships: ego-focused net-works, egalitarian bounded groups, and hierarchically nestedgroups. There are two further experiencable positions: involun-tary exclusion from all these organized patterns (fatalism, withimposed relations) and voluntary withdrawal (the hermit). Theoverall picture is a five-fold, self-organizing system. Accordingly,[37] proposes the transition topology as: egalitarian, individualist,hierarchist, and fatalist. Ref. [37] further argues that ‘‘in the initial

stages the egalitarian or fatalist approach may be most appropriate,the individualist and maybe hierarchic modes might be the most

relevant ones in a later stage of the change process’’, because ‘‘in the

end actors in the system should work in line with the new desired

setting, either as a result of market incentives (individualist mode), or

institutional and other settings (hierarchist mode)’’. It seems thattheir analysis finally resides to the dichotomy of market andmanaged planning, as if they were totally opposite. As for us,vision, strategy and planning are of vital importance for energysystem transition, but it does not necessarily exclude the role ofmarket mechanism [17,33]. Hence in the following section, weadhere to the combination of market incentive and planning forthe power system transition in China.

In the school of Innovation Transition, [38] refutes [35] andinsists that no transition is planned and coordinated from the outsetand every transition becomes coordinated at some point throughthe alignment of visions and activities of different groups. Tocounter the presumed, bottom-up, niche-driven bias in the under-standing of transitions, and highlight the timing and nature ofinteractions, [38] proposes the typology of transition as five typesas: (1) reproduction: on-going processes of change within the socio-technical regime (i.e., not involving interaction with the landscapeor a technological niche); (2) transformation: processes of changethat arise from the interaction of an evolving landscape with thesocio-technical regime (but not with the technological niche level);(3) substitution: replacement of one dominant technology withinthe socio-technical regime by another as a consequence of interac-tion between all three levels; (4) de-alignment/re-alignment: inter-action between the three levels resulting in competition between adominant technology within the regime and a number of othercompeting options, which have different performance characteris-tics, eventually resolved through emergence of a new dominantoption; and (5) re-configuration: replacement of a set of interlockingtechnologies by an alternative array of inter-related technologieswhich fulfill the same, or similar functions.

2.3. Our approach

As noted by [37], a specific blueprint for governance of systeminnovations is not a wise course of action currently. More funda-mentally, modern insights from sociology and the philosophy ofscience make it doubtful if one can ever obtain convincing proof thatone well thought-out governance theory is scientifically superior toanother. With a pragmatic viewpoint, we employ a hybrid strategytaking into account the above-mentioned transition pathways.The perspective by [38] will be employed for transition pathwaystudy. In addition, we will identify pathways combining bothmarket and planning tools to try to be proactive and avoid thedeadlock of unwanted emergent transformation by ‘purely endo-genous interactions under market mechanism.’

In specifying plausible transition pathways for the futuredevelopment of China’s power systems, we focus on different

J. Yuan et al. / Renewable and Sustainable Energy Reviews 16 (2012) 5660–5677 5663

pathways for the governance of these systems and their implica-tions for the rates of innovation and technological developmentsneeded. Then based upon innovation theory, the barriers for thetransitions are analyzed according to technology launch path.Because our motivation is not to appraise the technology andrecommend policy on a case-by-case base, we propose an inter-active framework for transition management on methodologicalperspective and only appraise representative technologies indetail as case studies to show how to design a consistent packageof policies for the low carbon transition.

3. Current power landscape and niche in China

3.1. Brief history of power systems development in China

China stepped into the era of the electric lamp as early as1879; but the current power system is developed from scratchever since the birth of People’s Republic of China in 1949.As summarized by [39,40], the history of China’s power systemcan be divided into four periods. From 1949 to the middle of1980s, in a centrally planned and administrated system, thepower sector was run by a State-Owned Enterprise (SOE), whichwas also a ministry affiliated with the State Council in the centralgovernment. Its branches were administration bureau whichwere affiliated to local governments at all levels. Because ofcontinuously increasing demand, power supply was never ableto meet the demand. Thus strict rationing of power supply forfactories and blackouts in urban areas was common. In most ruralareas, there was no access to electricity at all. During this time,the shock of Oil Crises of the early 1970s caused deep worry aboutthe security of fuel in developed countries, which resulted in thefirst round of nuclear power boom. However, because of thehistorical mistrust between the East and the West, nuclear powergeneration was unavailable in China until the 1990s.

During the period from 1985 to 1997, to cope with serious powershortage, the central government introduced the decentralization ofpower sector to the provincial governments and opened the invest-ment of power generation to provincial governments, private and

ElanIn

Learning processes take place in mDifferent elements are gradually li

Landscape develpressure on existopens up, creatinopportunity for n

Landscape developments

Socio-technical regime

Niches

Socio-technical regime is ‘dynamically stable’.In different dimensions, there are ongoing processes.

Markets, user preferences

Science

Policy

Technology

Culture

Fig. 1. Multi-level perspective framework fo

foreign investors with guaranteed returns. Meanwhile, the owner-ship and operation of coal mines was also decentralized to theprovincial governments and opened up to private investors togradually secure coal supply at a relatively low price. The decen-tralization of investment decisions and the relative low fuel pricehave spurred the rapid growth of coal-based thermal power plantsand large-scale hydropower plants construction. During this period,there was boom in gas turbine power plants construction inindustrialized countries due to oil price collapse in 1986 and thediscovery of large oil fields around the world. However, due to apoor endowment of oil and gas, gas power did not enter into thegeneration mix in China.

During 1997–2002, with the macroscopic reform of governmentfunctions, in power sector there was a separation of government andbusiness operation and the creation of State Power Corporation(SPC). During this period, the relationship between SPC and provin-cial power corporations suffered continuous conflicts. Since 1998,the State Council declared to accelerate the construction andrefurbishment of rural power systems to increase electricity accessin rural areas. Because of the 1997 Asian Financial Crisis and the vastinvestment in power facility, the headache of power shortage waslargely eased during this period.

In 2002, as a response to worldwide deregulation of the powersector and continuous conflicts in the existing managementframework, the central government introduced the unbundlingof generators and grid companies. Five national generators andtwo grid companies were established. These five national gen-erators, two grid companies, together with dozens of provincialgenerators comprise the incumbent of China’s power sector. StateElectricity Regulatory Committee (SERC), the power regulator inChina, was also created, though its independence and mandatecapacity still need to be enhanced. With reforms, the principle ofincentive-based operation is gradually introduced in the powergeneration sector. Since 2002, with the recovery of China’seconomy from the 1997 Asian Financial Crisis, power demandincreased quickly and the installation of new power generationcapacity is extraordinarily spectacular. In 2007, China’s powersystem could manage to provide proper supply without large-scale blackouts [40, p. 58] Fig. 1.

ements are gradually linked together, d stabilise in a dominant design. ternal momentum increases.

ultiple dimensions. nked together through co-construction.

opments, put ing regime, which g windows of ovelties

New socio-technical regime influences landscape

New configuration breaks through, taking advantage of ‘windows of opportunity’.Adjustments occur in socio-technical regime.

Time

r socio-technical transition study [19].

J. Yuan et al. / Renewable and Sustainable Energy Reviews 16 (2012) 5660–56775664

3.2. Overall picture of China’s power systems

Growth of electric power consumption has occurred fasterthan that of primary energy consumption over the past threedecades and has resulted in tremendous growth of power gen-eration capacity and rapid electrification (Fig. 2). From 1980 to2009, annual electricity demand in China grew more than 12-fold,from 300 to 3660 TW h [41]. Demand growth of this magnitudeand speed has contributed to consistent and severe capacityshortages. At the same time, generation capacity in China hasincreased significantly to meet with the power demand. In 1980the total generation capacity in China was only 65.8 GW, while in2009 the installed capacity amounted to 863.6 GW, also a 12-foldgrowth (Fig. 3). Especially after 2004, the annual net increase ingeneration capacity always ranges between 50 and 100 GW,thereby creating a new record in the history of world powersystem. Only the United States once maintained the annualgrowth of 50 GW during the 1970s. With the rapid developmentof power systems, the enhancement in grid infrastructure andoperation brought about the decrease in line (transmission anddistribution) losses. In 2005, China’s power line loss was 7.12%,ranking the upper middle level compared with other countries [42].

The coal-based generation mix results the carbon lock-in inChina’s power system, making it the largest contributor of CO2

emissions in China as well as the main source of other environ-mental pollution. China’s primary fuel mix is dominated by coal, afactor that determines China’s significant environmental pollution[43]. According to estimates by various experts, the coal reservecould be exploited for more than 100 years under the currentproduction and consumption rates, while the remaining provenrecoverable reserves of crude oil and natural gas could beexploited for only 20 years and 37 years, respectively [44].

-1.00

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energy consumption elasticity electricity consumption elasticity

Fig. 2. Energy and electricity consumption elasticity in China, 1985–2009 [41].

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Fig. 3. Total generation capacity and electricity consumption in China, 1980–2009

[41].

The exploration of gas reserves in recently years has madeencouraging progress and may significantly expand its exploitableyears [45, p. 128], which provides the possibility for gas powerdevelopment in China. This situation has determined China’s coal-based energy consumption structure (Fig. 4), which has furtherled to China’s generation mix being dominated by thermal powerunits. The share of thermal power units in the entire portfolio wasas high as 70%. As a result, the thermal power units consumedmore than 50% of the country’s total coal resources in 2007 formeeting most of the electric demand in China (Fig. 5).

Because of the heavy reliance on coal, CO2 emissions frompower generation in China are significantly higher than the worldaverage and of most countries in the world. In 2007, CO2

emissions per kW h electricity generation in China were 758 g,comparing to 507 (world average), 549 (the United States), and362 (European Union’s 27 nations). In 2007 China emitted 6007million tones (Mt) CO2 while the power sector alone contributedabout 2700 Mt from coal combustion, or around 45% of totalemissions [48]. The power industry was also the largest emitter ofother primary pollutants, responsible for 45.2% and 45.39% of thecountry’s total SO2 emissions and particulate emissions in 2008,respectively [46].

Although China’s generation mix has been relatively stableover the past two decades, the composition of coal-fired powerplants has undergone a significant shift toward larger and moreefficient units. In the 1990s, most of the thermal units above300 MW installed in China were imported. In 1993 the share ofunits 300 MW and accounted only for 23% of the total thermalgenerating capacity. In 2007, the share of 300 MW units andabove and 600 MW units and above accounted for 50% and 21.6%of total thermal generating capacity, respectively. At the end of

Fig. 4. China’s generation mix [46].

Fig. 5. China’s Coal Consumption Structure in 2007 [47].

J. Yuan et al. / Renewable and Sustainable Energy Reviews 16 (2012) 5660–5677 5665

2009, the shares of 300 MW units and above rose to 69% [49].In addition, at the end of 2008, there were 10 units of 1000 MWultra supercritical (USC) generators in operation. Meanwhile to raisethe energy efficiency in power generation sector, China’s centralgovernment have led an effort to shut down small (r50 MW) andold (420 years, r200 MW) units, retiring 72.1 GW of these unitsbetween 2006 and 2010 [49]. As a result of this push toward highergeneration efficiency, the average thermal efficiency of coal-firedpower plants in China has sustained a linearly increasing trend sincethe 1990s, and now reportedly surpasses the average efficiency ofthe U.S. coal plants by a significant margin. In 2007, CO2 emissionsper kW h electricity generation in coal-based thermal plant in Chinawere 893 g (down by 7% from 1992 level), lower than the worldaverage (903 g), the U.S. average (920 g) and Japanese average(910 g), but still higher than European Union 27 nations average(835 g) [48].

The imbalance between power load and power resourcenecessitates long-distance large scale power transmission inChina. China’s power grid is divided into four regional synchro-nous grids. The Northeast-North-Central, East, and Northwestregions operated by the State Grid Corporation, while the Southoperated by the China Southern Power Grid. Although basic DCinterconnection among regional grids was achieved in 2005 [50],power flow among regions and even between provinces withinregions remains limited.

Meanwhile China has large spatial disparities between energyresources and load centers, and between regions with coal,hydropower, and wind resources. Coal reserves are concentratedin the north, load centers along the eastern seaboard, windresources in the Northeast and North grids, and hydropower inthe Central and South grids. The lack of greater interconnectionamong regional and sub-regional grids imposes constraints onoptimal use and delivery of energy resources, limiting the avail-ability of dispatchable hydropower resources to provide peakingand ancillary services and straining the transportation systembecause of the vast need to ship coal by rail and road.

Operation efficiency, especially in an environmental sense isnotoriously low because of the guaranteed return policy since the1990s. Dispatch in the Chinese power sector has, since the early1980s, operated under an ‘‘equal shares’’ formula whereby genera-tors of a given type are guaranteed a roughly equal number ofoperating hours to ensure adequate revenues to recover their fixedcosts. Economically and environmentally, this practice is inefficient,as generating units with higher heat rates (i.e., lower efficiency) mayreceive the same number of operating hours as those with lowerheat rates. In addition, equal shares dispatch has contributed toinefficient generation investment by encouraging overcapacity [51].Average capacity factors for coal-fired generators were only 55% in2009 [41]. However, the root of the inefficient dispatch ruleoriginated from the incentive policy of guaranteed investmentreturn on generation during the 1990s. Because power plantsusually have operation life-cycles of 30–40 years, reformation to amore efficient rule has proven difficult. Five provinces began toexperiment with an energy efficient dispatch system in 2007, butthis pilot system has met with technical and economic obstacles andhas not been replicated in other provinces [52].

Many of the generation services provided by natural gas unitsin other countries are instead provided by coal or hydropowerunits in China. In regions that do not have hydropower resources,coal units are used for load-following and peaking generation,requiring significant cycling of coal units and reducing theefficiency of these units. Coal plants are also often used to providethe ancillary services required to maintain grid reliability, includ-ing spinning and non-spinning reserves.

Without a formal and transparent pricing mechanism that canlink real cost and retail price, the current pricing policy poses

significant barriers to transition to a more efficient power system.Despite incremental changes to wholesale generation and retailrates, China continues to lack a formal, transparent mechanismfor linking costs and retail prices in its electricity sector. Whole-sale generation rates in China have historically been loosely basedon average costs. Since 2004, rates for thermal generators havebeen set using benchmark pricing, in which generators in thesame technology class are given the same tariff, based on anestimate of annual output and fixed and variable costs for thatclass. As coal prices rose in the 2000s, China’s central governmentdeveloped a ‘‘co-movement’’ mechanism that allows for somepass through of fuel cost increases. Wholesale rates for renewablegenerators are set using regional benchmark prices, while ratesfor hydropower and nuclear generators are set on a facility-by-facility basis because of the vast initial capital investment cost ofthese generators. Provision of ancillary services has historicallybeen limited in scale and scope, mandatory and uncompensated,but plans to compensate generators for services are currently inthe early stages of implementation. Because of the dominance ofcoal in China’s electricity system, this predominantly benchmark-based approach to wholesale pricing means that generationsupply curves in China tend to be relatively flat.

The revenues grid companies receive for transmission anddistribution (T&D) services are currently based on the residualbetween retail sales and generation costs. This residual is inheritedfrom historical prices and is not based on a bottom-up accounting ofT&D costs. Beginning in 2005, the State Electricity RegulatoryCommission (SERC) developed accounting standards and reportingrequirements for grid companies, but the level of detail andtransparency in the disclosures required by SERC is not sufficientto assess whether costs are reasonable [53]. Moving toward cost-based T&D pricing is a continuing priority for regulators [54].

Retail electricity prices in China have historically been designedto reflect government policy and social priorities (e.g., maintaininglow fuel prices to boost economic growth and affordable fuel pricesfor household), instead of the cost of service [40]. Commercialcustomers and, to a lesser extent, other industrial customers payat higher electricity rates that subsidize agricultural users, fertilizerproducers, large industrial customers, and residential customers.There have been some adjustments to the retail pricing system todeal with emerging challenges. Since the 1990s, many provinceshave begun to use retail pricing to manage peak demand, with bothinterruptible and time-of-use (TOU) pricing for industrial, commer-cial, and, in a limited number of provinces, residential customers.To encourage conservation, China’s central government is currentlydrafting rules to create step tariff rates for residential customers.Neither TOU prices nor step rates are ultimately cost-based. The lackof a cost basis can lead to perverse incentives, such as encouraginggrid companies to sell more power in peak periods under TOU rates[54], which is the natural behavior of a monopolist.

Developing renewable energy in power systems is still trou-blesome with difficulties. China has a rich endowment of renew-able energy and has formulated favorable policy for renewableenergy development. Given the relatively high costs for solar andbiomass power, wind is and will likely continue to be theprincipal non-hydro renewable resource in China. Ever since thepublication of the Renewable Energy Law formulated in 2005 andthe Medium-and-long Term Development Planning for Renewable

Energy in 2007, wind power has experienced rapid growth inChina [55,56]. At the end of 2010, installed capacity connected tothe power grid has increased from 1.06 GW in 2005 to 31.07 GW.

Wind power is initially taken by the Chinese government as ameans for solving the problem of electricity access of villageresidents and herdsman in remote areas and thus a niche marketwas initiated. Its recent successful penetration into the powerregime depends on the interactions of the following factors: (1)

J. Yuan et al. / Renewable and Sustainable Energy Reviews 16 (2012) 5660–56775666

the issue of the Renewable Energy Law and related planning hasprovided a positive signal and stable expectations for investors;(2) most importantly, the government’s stipulation on the renew-able generation portfolio for major generators has made it anecessity for them to develop wind power projects when gettingnew thermal power plants approved by the government; (3) thefavorable price subsidy policy and availability of CDM for projectsupport by the carbon trade has spurred the enthusiasm ofinvestors; and (4) global development and the growth of domesticmanufacturing has decreased the investment cost to make windpower more attractive to investors.

Although China’s wind power growth has been the most specta-cular in the world for the past decade, the following factors haveposed and will pose serious threats to its sustainability. First of all,because of the intermittence of wind power generation, the gridcompanies in China are reluctant to integrate it into the power grid.Even though the renewable energy law stipulates the obligation ofthe power grid to purchase the full amount of renewable generationaccessed to the grid, without specific operation rules, grid operatorssimply reject wind power access with reasons such as unpromisingaccess conditions, operation safety requirements, etc. The windcapacity factor was as low as 23.7% in 2009, which is the evidenceof the difficulties of wind access [41]. Second, the incompatibilitybetween wind power projects and the power grid expansionplanning has made grid access difficult. China has formulatedambitious planning of eight large-scale inland windmill bases in10 GW scale in the provinces of Xinjiang, Inner Mongolia, Hebei,Jilin, and Shandong. However without synchronous power gridexpansion and proper reserve capacity plants, it is unlikely that thisplan can be realized. The recent experience of the Western InnerMongolia Power Grid is such an example at hand [41]. Third, thecurrent policy to develop wind power is unsustainable because itneglects the vast investment requirement in the power grid anddiscriminates against small projects and small investors. The biddingrule is bundling the regional wind resources together into projects inscale of GW and choosing the bidder with the lowest price.The policy is effective in project development and cost reduction.The equipment cost has been successfully cut down from 6000 RMB/kW in 2004 to around 4000 RMB/kW in 2010. However, it simplyleaves the issue of grid connection to the grid operator and finallyleaves it unresolved. There is no surprise that under such policy mostof the wind projects are operated by the five big national SOEgenerators and other large province-owned generators, which isdifferent with the success of wind power in Germany and theNetherlands where various small investors enter into the wind powermarket. Considering the long-term wind power development pro-spective, an optimal development of wind power should consider thesolutions of both a ‘‘large windmill base and long-distance transmis-sion’’ and ‘‘distributed power generation’’, which in turn call for theentrance of small investors into wind power market. However, underthe current policy, the opportunity for small investors with limitedfinance resources is almost impossible. Finally and perhaps the mostimportantly, the current price mechanism for wind power is alsoproblematic. The lowest price bidder mechanism and the lowcapacity factor have resulted in the unprofitability for investors andit discourages the confidence of the generators. On the other hand,there are still no concrete stipulations addressing the issues of gridcost recovery for additional transmission investments and morereserve capacity when incorporating wind power into the grid.

3.3. MLP analysis of power system in China

3.3.1. Power landscape and regime in China

The current power system regime in China for meeting industrialprocess, lighting, heating and power-related services may be char-acterized as a centralized system. Electricity is centrally generated,

largely from coal, hydropower, and a small but growing amount ofnuclear and renewable sources; it is delivered to businesses andhomes through the large scale transmission and distribution net-works, before being used to provide power, lighting, heating andservices with the aid of end-use technologies and the buildingsinfrastructure. The absolute low starting point, the vast growth inpower demand incurred by rapid industrialization of the Chineseeconomy and the rise of China as a world factory, as well as theincreasing demand from household as a result of enhanced livingstandards and the popularization of home appliances, make rapidgrowth of the power supply capability a policy priority in China. Thestrategic importance of energy to enabling economic activity andwell-being means that the system is the subject of intense policyactivity, which focuses on ensuring secure and affordable supplies,and other social objectives. The meta ‘‘socio-technical landscape’’ ofelectric sector in China can be characterized as:

�

a dependency upon fossil-fuel-based energy supply (mainly coaland rising supply capability of gas) and large-scale electricitygeneration technologies, � a coal extraction, importing, processing and transportation infra-

structure always unable to catch up with increasing demand,

� province-based power grids and a growing interconnected

national grid to ease the geographic imbalance betweensupply and demand,

� historically vertical integration monopoly just being restruc-

tured into two grid operators and a sets of SOE generators whoare regulated by government bodies,

� a weak but expanding rail and road infrastructure, � a traditionally centralized administration system, while power

market reform initiated but rather fruitless.

It is worth noting that the province-based power system, arelargely a result of the decentralization of power system toprovincial policy during the 1985–1997 period, and that wasone of the reform priorities in 2002. In the reform program of2002, when dismantling SPC, two grid companies, China SouthernPower Grid (CSG) and State Grid (SGCC) were established. CSG,managing the power grid in five provinces, Guangdong, Guangxi,Guizhou, Yunnan and Hainan, is the result of experimentation onregional power grid management for optimization of powerresources in larger areas, while five regional power grid corpora-tions affiliated to SGCC (managing the power grid in the rest ofthe provinces except for Tibet and Western Inner Mongolia) werealso established. However, trying to maintain its power SGCC hasdeprived the designed functions of the affiliated regional powergrid companies. Though in the 2002 reform program, paragraphslike ‘promote regional electric market reform in appropriate time’was included, but so far no policy has ever since addressed thisissue. Another leading reform goal ‘‘to break the monopoly andintroduce competition’’ also came to a deadlock. The entrance ofprivate or foreign investors into power generation market is stilllimited. SOEs (including central and local governments) enjoymonopoly power on generation side and control 90% of genera-tion assets [57]. Introduction of competition on the generationside was preliminarily experimented within Northeastern Chinabut soon stopped because of consistent power shortages since2002. Retail price is still strictly regulated by the government andcustomers (including industry and commerce customers) do nothave the right to choose suppliers.

The ‘landscape’ provides the dominant assumptions, valuesand deeply rooted socio-economic trends at a given period oftime. It also encapsulates the key ‘philosophy’ behind policy-making trends and in that sense can be said to reflect thedominant perception of ‘problems’ and the ways to resolve those

J. Yuan et al. / Renewable and Sustainable Energy Reviews 16 (2012) 5660–5677 5667

problems in electricity sector. In China key processes that influ-ence or ‘drive’ the power regime at the landscape level include:

�

TabNic

St

M

E

D

R

Sou

the increasing power demand from the industrial sectorbecause of the on-going industrialization process and a biggap in energy efficiency compared with the rest of the world,

�

the increasing power demand from households because ofincreasing income and rapid urbanization,

�

a huge population base of 1340 million and still growing, � the increasing pressure on primary energy supply, environ-

ment and ecology because of the heavy reliance on coal,

� global concern of GHG reductions and increasing pressure on

China’s ‘‘measurable, reportable and verifiable ’’ obligation tocut GHG emissions,

�

China Government’s commitments to reduce emissions, andreduce GDP carbon intensity by 40–45% in 2020 as of 2005 andto promote clean energy sources, increasing the share of non-fossil over primary energy by 15% in 2020,

�

concerns over security of primary energy supplies, � external factors leading to high and/or volatile oil and gas

prices and related concerns over energy affordability and fuelpoverty, as well as physical disruption of external supplies(war, terrorism, foreign governments limiting supply, etc),

�

the gradual transition of the Chinese economy from centra-lized planning to a more market based economy that willgradually blend into the global economic system,

�

the international efforts to deliver renewable energy technologies.

Many processes that drive the power landscape in China, suchas energy security concern and international factors are the sameas other countries face. However, under the macro-economic-social transition process, the interactions of industrialization,urbanization, and energy-environment-ecology constraints, willpose important impacts on the power landscape, and thusinfluence the transition pathways. We will address these issuesat the end of this section. Meanwhile, the international pressureon China to assume ‘‘measurable, reportable and verifiable’’ CO2

reduction targets will intensify during China’s growth process.Currently, by emphasizing that as a developing country andaccording to ‘‘shared but differentiated’’ principle, China can and

le 1he energy technology options analysis.

age of

(technology)

option

Fossil-fuel based Nuclear Re

ature USC boilers combined heat and

power generation (CHP)

Existing fission reactors W

ge

Gas (coal bed gas) power

generation

so

bi

H

arly

commercializa-

tion (6–15 years)

Some gasification technologies

some CO2 capture technologies

CO2 storage (CCS) retrofitting of

old boilers to USC

New fission reactors So

Bi

an

Gr

evelopment and

demonstration

(D&D) stage

(15–20 years)

Some CCS technologies

integrated gasification combined

cycle (IGCC) underground coal

gasification polygeneration

Fischer–Tropsch process

Fourth generation reactors

(high temperature gas

reactors etc.)

W

ga

fu

esearch stage

(20 years and

beyond)

Novel CO2 capture technologies Nuclear fusion Bi

en

sy

Ne

rce: compiled by authors based on [17,24,59–61].

will take active measures to cut CO2 emissions so far as they donot impede the economic development. As expected in 2020, percapita GDP of China will exceed 4000 US$ and in 2030 it isexpected to exceed 7000 US$ (2000 constant prices). It is highlylikely that in 2015 when per capita GDP will exceed 3000 US$China will step into the upper middle income country groupaccording to the World Bank standard [58]. At that time, with itsraised share of global GHG emissions and the expected intensifiedinternational conflicts, it is very likely that Chinese Governmentwould need to take a more positive attitude toward GHG reduc-tions. Thus in the future 5–10 years, the landscape for powersector will definitely experience radical change towards decarbo-nisation and therefore exert more pressure the power regime tochange.

3.3.2. Technology niches

A wide range of competing energy technologies are currentlybeing developed, reflecting not only the underlying scientific andtechnological base but also the perceived opportunities arisingfrom the emerging low-carbon socio-technical regime. Ref. [23]has proposed a categorization of these technologies, distinguish-ing between mature technologies and those that are at variousstages of commercialization, demonstration, research and devel-opment. Ref. [59] also appraises the renewable energy technologyprogress in China and proposed their categorization. However,their categorizations mainly focus on pure technological level andneglect final consumption as a means for efficiency improvementby technological innovation in the industrial process. Based ontheir work and adapted to our pathway study purpose, wepropose our decarbonisation categorization for power sectortransition in China (Table 1). In our categorization, we classifyavailable and potential options into five streams, namely fossil-fuel, nuclear, renewable, demand-side and energy carriers andstorage technology and appraise the availability of options intotypical technology innovation stages: mature, being available athand with affordable prices in large scale; early commercializa-tion, though technically feasible but still being expensive and inneed of technological learning process to become technicallyeffective; development and demonstration; and the researchstage. The time line in the table is not strict, given the uncertainty

newables Demand-side technologies Energy carriers and

storage technologies

ind turbines traditional

othermal technology

Energy-efficient appliances

compact fluorescent light

Industrial process

innovation

Batteries

lar heat water system

omass generation

House insulation Pump storage

ydropower Heat pump (geothermal

or air)

me wind turbines

omass boilers biofuels PV

d CSP

Passive solar low-carbon

buildings LED lighting

system

Fuel cells

id modification

ave Tidal biofuels, e.g.,

sification, AD, transport

els Grid modification

Intelligent buildings smart

meter The internet of

things

Hydrogen from gas and

electrolysis Fuel cells

ofuels e.g., pyrolysis

hanced geothermal

stem

Hydrogen generation

from biomass, waste,

nuclear, etc.

w materials for PV

J. Yuan et al. / Renewable and Sustainable Energy Reviews 16 (2012) 5660–56775668

in innovation and the inaccuracy of appraisal, and is calibratedbased on technology launch (development, introduction anddeployment of new technology into widespread use) stage.

As we can see from Table 1, on the fossil fuel stream, though inthe long-term CCS and IGCC technology is highly promising andthus will provide opportunities for coal remaining in the genera-tion mix, in the near future (less than 10 years), large-scalecommercialization of these technology is unlikely and the mostreliable options are to rely on USC and CHP to increase the energyefficiency of newly built thermal power plants. On the other hand,with the recent inspiring progress on natural gas exploration andthe technology advance in coal bed gas recovery, gas plants forpeak load and/or cogeneration have a very promising future.Considering the lower CO2 emission factor of gas as of coal, thisis helpful for alleviation of carbon emissions.

On the renewable energy stream, hydropower is still expectedto take the lead for at least the next decade, because of its lowcost and operational superiority. Wind power is the most promis-ing renewable technology besides hydropower. The domesticmanufacturing of wind turbines has made significant progressever since 2002. Currently the mainstream unit is in 1.5–3 MWand the price decreased to around 4000 RMBf/kW in the end of2010 (comparable or less than thermal power unit price). Mean-while the benchmark price for wind power set by NDRC in 2009ranging between 0.51 and 0.61 RMBf/kW h is already lower orapproaching peak hour retail power price in some areas. In theend of 2010, domestic manufacturer SINOVEL produced China’sfirst 5 MW turbine unit and it is expected to release the 6 MWunit soon. Another domestic manufacturer XIANGJIANG GOLD-WIND also plans to accelerate the research and development of a6 MW turbine. When the 5 MW and above units enter the large-scale commercialization stage, the technical economics of windwill make the large-scale offshore wind projects feasible. Solarpower in China has also entered the early commercializationstage. Some demonstration projects are deployed but powergeneration price is still high. Currently unit investment for PV inChina is around 12,000–14,000 RMB f/kW and generation costranges between 0.9 and 1.1 RMB f/kW h. This cost level is similarto wind power in 2002 and if the successful experience could becopied, solar power would enjoy rapid growth in the comingdecade. Biomass generation technology has also matured inChina. However, because of the limited supply of energy cropsand because of direct competition with other sectors such asagriculture and husbandry, the scale of biomass generation is tinyin only about 1 GW and is thus difficult to become part of themain power regime. On the other hand, the development ofsmall-and medium-scale distributed biogas or waste generationin rural or urban areas is promising. Globally, other renewablegeneration technologies such as tidal power, wave power andother novel options are still in their early research stage in Chinaand we have to wait for at least 15 years or more for theircommercialization.

On the demand side, there are some novel techniques toconserve primary energy and power in buildings as ‘low carbonbuildings’ in the medium-and-long term perspective, but themost important near-term options are innovation in industrialprocesses to ease power demand in production. For options tosave energy consumption in buildings, considering the low turn-over rate of houses (a typical house will be used for at least 50years) even there are available options for new housed as passivesolar technique, simpler building refurbishment technique suchas improved insulation and double or triple glazing will be themost cost-effective and easy to implement.

With regard to energy carriers and storage streams, fuel celland hydrogen from various sources are still at the early researchstage, promising but unavailable for large-scale application for at

least 20 years. The current mature options as batteries and pumpstorages are energy-consuming for power storage and thus canonly be used for small-scale or spare applications.

And finally we discuss the nuclear power stream. By the end of2008, Chinese nuclear power capability in operation was 9 GW.China’s mid-and-long-term Nuclear Power Development plan andits revision [62] suggests that by 2020, the operation capabilitywill be 60–70 GW with 30 GW under construction, and thecapability of nuclear power will be more than 5% of overallinstalled capacity. Currently there is widespread and hot debateon the future of nuclear power and Chinese government alsotemporarily suspends approval of new nuclear projects as aresponse to the serious nuclear accident in Japan [63]. As a result,China government will put more attention on hydropower, windand solar power to meet the 15% clean energy goal in 2020.Nonetheless we argue that the underlying trend of nuclear powerin China will not be radically changed, due to three reasons. First,China relies on nuclear power for 5% primary energy supply giventhe still small scale of non-hydro renewable; second, with theincreasing international pressure to reduce carbon emissions,nuclear power is a ‘‘must’’ choice for China; and third manycountries and regions have high nuclear shares over the genera-tion mix, e.g., France (77%), Japan (33%), the US (20%) andEuropean Union (35%), while China (2.1%) is far lower. Actually,in the National Energy Work Conference held in January 2011, theprevious 40 GW goal for 2020 was revised as 80 GW (thus doublethe goal proposed in 2007). And the newly published 12thnational economic and social development plan (FYP) outline(the topmost economic plan in China) at 16th March 2011 statesnuclear power policy ‘‘On the base of guaranteed security develop

nuclear power efficiently ’’ and ‘‘develop nuclear power in eastern

coastal and some developed inland areas’’ [64].

4. Pathways towards low carbon power system in China

4.1. Landscape prospect

China has experienced rapid economic growth for more thanthree decades. According to [46,48], per capita GDP in China grewat an accelerating rate, with the compounded annual growth at7.7%, 9.25% and 9.38% for the last three decades. The Chinesegovernment has proposed an economic growth goal in 2000 thatper capita GDP will surpass 3000 US$ (2000 price). Howeverbecause of the rapid growth in the past decade in 2010 per capitaGDP already reached 2330 US$. Trying to describe the realisticpicture, we thus choose a set of rates in linear decreasing trendsand suppose them at 8.2%, 6.8%, 5.9% and 5.1% for the nextconsecutive five-year till 2030 (compound annual growth rateat 6.5%) to calculate the per capita GDP for landscape analysis. Fordemography, with the growth rate peaking during the 1980s,there is obvious trend to slow-down in the past two decades. Also,there is widespread discussion on China’s population dynamicsand the consensus is that population will peak around 2020 andwill decrease slightly afterwards (Table 2).

Output structure will also exert significant impact on energyand power demand. Currently in the group of lower middleincome, China’s output is predominantly secondary industry(especially the manufacturing sector) and is lower in tertiaryindustry. However with the ongoing industrialization process, theshare in the secondary industry will not decrease significantlyuntil 2020, thus will pose a great challenge to China’s energysupply and low carbon development.

According to the above analysis, the baseline socio-economicprospective is complied in Table 3. In the prospective, in 2015when per capita GDP exceeds 3000 US$ China would step into the

Table 3Key socio-economic variable baseline and BAU power demand scenario for landscape analysis in China.

Year per capita GDP

(2000 US$)

population

(million)

GDP (billion

2000 US$)

Output structure (%) Electricity demand

(TW h)

Per capita electricity

consumption

(KW h/person)Primary Secondary Tertiary

2010 2327 1340 3,120.4 10.2 46.8 43 4,056 3000

2015 3451 1390 4,797 10 46 44 5,628 4050

2020 4795 1450 6,952 9 45 46 7,503 5170

2025 6386 1420 9,069 9 42 49 9,514 6700

2030 8190 1400 11,465 8 40 52 11,091 7920

Table 4Comparison of per-capita electricity consumption for different income group and

countries [66].

Unit: KW h/person 1971 1980 1990 2000 2005

high income 4271 5,871 7,390 8,934 9,403

upper middle income 663 1,146 2,617 2,477 2,749

lower middle income 383 469 678 708 891

World 1198 1,583 2,121 2,389 2,673

United States 7517 9,862 11,713 13,670 13,692

Canada 9301 12,764 16,109 16,991 17,319

Japan 2531 2,950 3,546 4,080 4,061

Germany 4062 5,796 6,640 6,636 7,113

France 2812 4,527 6,127 7,485 7,944

United Kingdom 4252 4,684 5,357 6,115 6,252

Italy 1949 2,318 2,586 2,997 3,120

China 151 282 511 993 1,783

Table 2Historical key socio-economic series for China, 1971–2010.

Year/period Per capita GDP (2000 US$) population (million) GDP (billion 2000 US$)

History data 1971 127 841 107.1

1980 186 981 182.9

1985 290 1051 304.5

1990 392 1135 444.6

1995 658 1205 792.8

2000 949 1263 1198.5

2005 1451 1305 1893.4

2006 1611 1312 2113.0

2007 1809 1320 2387.7

2010 2327 1340 3120.4

Growth rate (%) 71–80 3.53 1.411 4.98

80–90 7.7 1.468 9.28

90–2000 9.25 1.069 10.42

20,000–10 9.38 0.604 10.04

Note: [46] for 1971–2007 data and [65] for 2008–2010 data.

J. Yuan et al. / Renewable and Sustainable Energy Reviews 16 (2012) 5660–5677 5669

upper middle income group, and in 2030 when per capita GDPexceed 8000 US$ China would approach the floor level of highincome group. Our prospective is largely in accordance with ChinaGovernment’s long-term vision of ‘‘build a well-off society in all-around way in 2020’’. Meanwhile the share of secondary will dropto 46% in 2015 and 40% in 2030, while the share of tertiary of willincrease to 44% in 2015 and 52% in 2030. With per capita GDPapproach 5000 US$ in 2020 and exceed 8000 US$ in 2030,considering the rapid growth in the past decades and the ongoingindustrialization process, we assume that China’s per capitaelectricity consumption will exceed 4000 kW h in 2015 (aboutthe level of high income country group in 1970s), 5000 kW h in2020 (approaching high income country level in 1980s) andapproach 8000 kW h in 2030 (about the level of US in the 1970sand the high income country group in the middle of 1990s)(see Table 4). Accordingly, we compile a baseline power demand

for analysis. Electricity demand would reach 7500 TW h in 2020and 11,090 TW h in 2030.

When the size of the economy size more than triples and at anincome level where consumption is bound to take off, what arethe most important factors that exert pressure on China’s powersystem regime? Here we will brief analyze four of them asindustrialization, the built environment, electric appliances(household and commerce applications) and transportation.

The leading important factor is the industrialization process.During the past decade, the growth of energy-intensive productssuch as steel and cement etc. in China has been very fast.According to [67], China accounts for 70% of the increasedproduction in crude steel, 83% in cement and 118% in steelmaterial during 2000–2008, which implies that with the increas-ing pressures of energy and environment for the industrializednations (especially the Annex I Kyoto Parties), more energy-intensive products are outsourced to China (Table 5). On theother hand, energy efficiency in China’s manufacturing sector issignificantly lower than developed countries, because of thelaggard technology and the low value added. Because of interna-tional trade and the vast domestic demand, though the share ofmanufacturing sector in total GDP will decrease, heavy industrywill experience significant growth and the absolute size ofmanufacturing sector will more than double in 2020 and triplein 2030 as of 2010, thereby resulting in vast growth of powerdemand and posing perhaps the biggest challenge to low carbonelectricity transition in China. Therefore, a well-designed industrypolicy to guide the healthy development of the manufacturingsector, as well as strict energy efficiency standard to promoteconservation will be among the most important options in China.

The second important factor is urbanization. Together with theincrease of income, it will exert significant impact on the powersystem in two ways. First, urbanization is the aggregation ofpopulation in urban areas. The urbanization rate in China increasedfrom 36.2% to 46% from 2000 to 2010 (implying 14 million citizens

Table 5Comparison of selective energy-intensive products production in China and the world [67].

Units: 10 thousands tonnes 2000 2008 China share in the

growth (%)

Selective energy-intensive product China World China share (%) China World China share (%)

Crude steel 12,770 57,009 22.4 56,900 120,000 47 70

Steel materials 14,121 92,947 47 69,600 140,000 50 118

Cement 59,700 175,588 34 163,000 300,000 54 83

Sodium hudroxide 648 4,500 14.4 1,718 5,866 29.3 78

Calcined soda 803 3,460 23.2 1,553 4,800 32.4 56

Ethylene 479 9,000 5.3 2,431 12,040 20.2 64

Table 6Comparison of selective electric appliances in rural and urban families [46].

Units/100 households Urban family Rural family

Year 2005 2009 2005 2009

Washing machine 95.5 96.1 40.2 53.1

Refrigerator 90.7 95.3 20.1 37.1

Air-conditioner 80.6 106.8 6.4 12.3

Color TV 134.8 135.6 84 108.9

Computer 41.5 65.7 2.1 7.4

Private car 3.4 10.9 – –

J. Yuan et al. / Renewable and Sustainable Energy Reviews 16 (2012) 5660–56775670

moving into cities annually) and will increase to 56% in 2020 thusresulting in vast housing demand. China has set the goal ofconstructing new homes for 400 million people by 2017 ([17] p.265). Houses are built for the long-term, on the expectation thathouses will be used for 50–70 years or more. On one hand, house is akind of stand-alone system implying that a new house could be builtusing the most modern and energy-efficient technologies (passivesolar house for example) available without regard for how otherhouses in the surrounding area have been built. On the other handonce built in its life cycle, buildings will consume substantialamounts of energy for lighting, ventilation, cooling and heatingpurpose. It is reported that the energy consumption per squaremeter in the existing 40 billion square meters of housing in China isthree times of that in advanced countries, while 90% of newly builthouses are energy-inefficient. Hence to cope with the impact ofurbanization and reduce the power demand in buildings, it makessense to immediately implement as much available energy-efficienthouse technology as possible in the new construction projects. Onthe other hand, refurbishment of existing houses, by improvedinsulation, new heating systems such as heat pumps to replacecentral air-conditioning can improve energy efficiency remarkably.

Urbanization will also result in the expansion of cities, in turnresult in increasing demand on regional transportation. Therelationship between transportation and power sector is compli-cated. On the one hand, all kinds of biofuels could also be used forpower generation. Considering the gigantic oil demand in thefuture, the inadequate domestic oil supply and the already highoil import dependence rate (50% in 2009), biofuel should takepriority over bio-generation whenever possible. On the otherhand, the technology of next generation vehicles, hydrogen/fuelcells or battery driven, will have significant impact on powersector. However, according to [68], hybrid electric vehicle tech-nology may be the only one mature enough in the next 10 years.Pending significant improvements in battery technology, plug-inhybrids could possibly start making an impact in about 10 years,while vehicles powered by fuel cells are unlikely to enter high-volume production in less than 20 years. Whatever technologyevolves, power demand will be significantly pushed up, by directconsumption by batteries or indirect consumption by hydrogen/fuel production. Considering the vast growth potential of privatecar demand [69], transportation alone will magically increasepower demand in China.

With growing per capita GDP and more disposable income,electric appliances will be popularized in households. Comparingthe difference of appliance inventories in rural and urban families[46], there is vast potential for demand growth for kinds ofappliances such as refrigerators, washing machines, computersetc., which in turn will consume more electricity (Table 6). On theother hand, with the expected rapid growth of the service sectorin the coming two decades, the popularization of office automa-tion and more large scale power-consuming data centers put intooperation in the future, there will be growth of power consump-tion by appliances in the service sector.

4.2. Possible pathways

According to the above analysis, to break the carbon lock-inand ease the intensified international pressure in the future, theonly feasible options for China are: (1) a more balanced economicgrowth plan, which calls for effective and practical developmentpolicies, especially policies for industrial sectors; (2) more ener-getic efforts on energy efficiency (technological innovation inmanufacturing sector, improved energy efficiency in buildings,high energy efficient appliances, and comprehensive city, trans-portation and building planning) would be vital to avoid thepotential future demand; (3) more penetration of clean energysources in primary energy supply, especially more radical devel-opment of hydro, wind and solar power in the near future, (4)more joint research and development (R&D) and commercializa-tion efforts with international partners to deliver CCS and carbongasification technologies in the medium future, considering theunavoidable role of coal in China’s energy system; and (5) moreactive science and technology research input in fusion nuclearand next generation hydrogen alternatives in the hope to replacethe current hydrocarbon based energy source.

In this section, to explore a range of potential transitionsassociated with China’s power system decarbonisation in along-term perspective, we are determined to probe the overallcanvas and will not constrain ourselves to technique or engineer-ing details. Because of the endogenous uncertainty in systeminnovation process and the vast complexity of the topic itself, thepicture is destined to be imperfect, harsh and speculative. A two-stage approach is employed in the study, with the first stageranging 2010–2020 while the second 2020–2030 for convenienceof analysis and also to approximately cater to the technologicalinnovation stages. Then different technology options are classifiedinto the reproduction, transformation, substitution, reconfigura-tion and de-alignment/re-alignment pathways according to theirrespective property in the transition process. Table 7 lists thepossible options in every pathway for two stages Table 8.

For the first stage, the feasible pathways will focus on reproduc-tion, transformation and substitution. In the reproduction pathway,considering the already high energy efficiency of coal power plantsin China, the effect of regular efficiency enhancements in existingunits would be tiny, but replacement of small-scale inefficient units

Table 7Possible power system transition pathways in China.

Stage First stage: 2010–2020 Second stage: 2020–2030 (and beyond)Pathway

Reproduction: efficiency

enhancement in coal-based large-

scale power system

Regular efficiency enhancement; CHP; substitution of small scale

inefficient unit with UVC unit; power grid operation optimization

Same as first stage

Transformation: minor modifications

to coal-based large-scale power

system

Demand side options as technology innovation in industrial

process, popularization of energy efficient appliances, house

refurbishment such as insulation and double glazing; isolated

distributed generation (DG) in remote areas

Low carbon building

Substitution: technology substitution

or power demand substitution

within centralized power system

Gas power, waste (biogas) power and/or gasþCHP; fission nuclear

power; inland and onshore wind power; solar power in

demonstration and commercialization; heat pump; passive solar

GasþCHP power; GIF nuclear; offshore wind power;

advanced solar power; fuel cells; MicroCHP

Reconfiguration: major modification to

coal-based large-scale power system

CCS research and experiment and demonstration; Fuel cells

research and experiment and demonstration; Centralized power

gridþsolar/wind/hydro/biogas and other combined DG

Regional power gridþultra voltage transmission

connectionþexpansion of kinds of DG technologies

including fuel cells

De-alignment/re-alignment: power

system coevolves with hydrogen/fuel

cell technologies

Research and development of hydrogen technology Possible Macrogird with large-scale UVCþCCS units and

other traditional carbon-free units or large scale fuel cell

plants based on underground coal gasificationþhydrogen

production as carriersþPossible DG and Microgrid with

fuel cell, wind, solar and other units

Table 8Comparison of two opposite policy fault-lines on innovation [33].

‘‘Let market do it’’ fault-line view Correct fault-line

Is undefined-all ‘innovation’ being good An understanding of what ‘innovation’ is and that not all of it is ‘good’

Supports economically rational policies which complement large-scale, status quo

companies rather than policies which encourage, create or reach multi-scale,

multi-diverse unknown outcomes

An acceptance that markets are not the best way forward for making all choices-

although certainly they are for many decisions (if not the majority) and will

continue to be central to any future sustainable energy system

Believes in linear, predictable development or innovation (which enables a

predictable known outcome from policies)

That it is not only acceptable to ‘pick’ a technology to support but necessary to

‘channel’ innovation policies

Considers quantitative economic as superior to broad qualitative analyses, not

least because it finds the latter difficult to incorporate

That choosing to support an environmental potion, which may not be a least-cost

measure, rather than choosing the economic or market option, may be

appropriate, necessary and sensible and provide a great deal of additional value,

albeit not in a way which is able to be valued monetarily

Considers broad carbon reduction policies superior to focused, technology policies

because the latter have to ‘pick’ a set of technologies or a particular technology

Accepting that trying to meet the challenges of climate change is a ‘system’ issue

not a technological-only issue

Consider risk as an important stimulator in innovation while policies which reduce

risk, inevitably, soften competitiveness which in itself must be undermining to

incentives which lead to the ‘right’ answer

The risk and transactional cost of innovation is directly affected by the policy,

which should tries to reduce it to encourage entrance and learning-by-doing at

reasonable input of the government

J. Yuan et al. / Renewable and Sustainable Energy Reviews 16 (2012) 5660–5677 5671

with UVC or CHP units is promising. In the transformation pathway,technology innovation in industrial process, popularization ofenergy efficient appliances, refurbishment of existing housing toincrease energy efficiency, promotion of distributed generation inremote regions with alternative clean energy sources would bepriorities. In the substitution pathway, developing safer fissionnuclear power in eastern coastal regions, developing a large inlandand onshore wind power base, large-scale CHP gas power inrelatively developed eastern regions, small and medium scale waste(biogas) CHP generation to provide local grid would be priorities.Particularly, solar power could be promoted by employing evenmore policy incentives to breed another important alternativerenewable in China as soon as possible. Heat pump and passivesolar technology which can substitute power demand substantiallyin household and office building could also be promoted. During thefirst stage, though there will be no obvious progress in reconfigura-tion and de-alignment/re-alignment pathways, proper R&D input inrelated technology, especially CCS, coal gasification, hydrogen pro-duction, fuel cell, next generation nuclear power etc and investmentin their demonstration and commercialization is very important. Forsuch a tremendous work, hand-in-hand cooperation with interna-tional partners on selective promising technology is a priority.

For the second stage, with the increasing share of renewablesin different scales and breakthroughs in next generation nuclear

and energy carrier/storage technologies, a multi-layer powersystem, consisting of large centralized units such as UVCþ largescale hydropowerþnuclearþgas units interconnected by anultra-high voltage DC/AC transmission system as the upper layer(macrogrid), thousands of regionalized medium scale renewables,CHP gas and/or biogas with fuel cells power as backup and otherpower storage facilities interconnected to macrogrid as themiddle layer (mesogrid) and millions of localized small-and-medium renewables, microCHP with small scale fuel cells, inter-connected with the regionalized Grid as the bottom layer wouldbe gradually shaped. Hydrogen and fuel cell would serve as vitalenergy carrier/storage facilities in the system.

5. Policy design implications for transition management

5.1. Basic assumptions on policy design

In analyzing the failure of the UK government in promotingsustainable energy, [33, p. 12–13] highlights the importance ofRegulatory State Paradigm and the related policies on innovationprocess, which is vital to sustainable energy transition. Accordingto [33], the challenge of successfully achieving a transition to asustainable energy system, rests on the ability of policy makers

J. Yuan et al. / Renewable and Sustainable Energy Reviews 16 (2012) 5660–56775672

(at all levels and in all positions) to encourage and enable thenecessary changes or innovations at the energy system level, at afirm level, and also in the patterns of sustainable consumptionand behaviors across society. However, the logic of market restson cost-efficiency and may obstruct innovation when the price isuncompetitive. Government action should be focused on estab-lishing a selection environment which is conductive to ‘innova-tion’ and to try to ‘channel’ the innovation as far as possible in theright ‘direction’. Particularly ‘not all innovation is good’, in thissituation Governments cannot ‘leave’ it to technology and fuelblind markets but do have to make a choice about what kind ofenergy future they want. Hence it is naturally that marketapproach alone is not enough and regulated approach is neces-sary. Ref. [17, p. 98] also argues that market economy is veryefficient for the allocation of resources, but only in a slowerevolution process. Also sometimes market is not perfect becauseof ‘‘path lock-in’’. On the other side, because of limited time andresources, we need to rapidly expand the use of existing energy-efficient technologies and products and develop a number of newalternatives, which is rightly the advantage of planning. Ref. [70]also argues that the energy transition for the U.S. needs a plannedprogram similar to the American Apollo program that put a manon the Moon in 1969. Besides, [60] also argues for a federalprogram to stimulate innovation in energy technology in the U.S.

5.2. Policy design implications for China

In considering the policy fault-line for innovation, a naturalquestion is how to manage the energy transition process. There-fore, a clear understanding of the innovation process is important.According to the standard pipeline model in innovation theory, atypical innovation process is as the follows: research that stemsfrom the curiosity of scientist or inventiveness of engineer leadsto an invention, which requires development to ready it forprototyping and then for commercialization. This model stressesthe process of technology supply-push, in which new technolo-gies evolve and push themselves into the marketplace. The majorobstacle to innovation of this kind, namely the ‘‘valley of death’’ inthe literature, is the gap in support and financing between basicresearch and later-stage development. As a result, the success ofmany major innovations has typically depended on a stronginjection of public money enabling them to bridge this valley ofdeath [60]. On the reverse side, according to market-pull model,most new products stem from the more mundane process ofmarket or demand pull, during which a market opportunity givesrise to an innovation, which eventually creates requirements forthe development and lastly for research. However, the innovatorsmake these long-term investments on new technologies inresearch, development, and demonstration only when they areconvinced that the new environment is here to stay, at least longenough for the resulting technologies to be preferred and come tothe market. While these two theories address on the process bywhich innovation occurs and the external influences to which itresponds, the third theory, innovation organization addresses themanagement of innovation and the organizations in which ittakes place. Accordingly, organization mechanisms are needed tohelp bridge the gaps between public and private sectors andinstitutions are needed to help smooth the interaction betweenpublic, private and academic sectors. However, energy posesmultiple challenges to the models in innovation in that thesolution to energy transition is a vast and complex array on boththe supply and demand sides while the powerful entrenchedarray of incumbents is resistant to change.

Regarding energy transition management, [17] proposes a four-step framework, in which analysis of the overall situation andpossible solutions is the first step; in the second step a high-level

map of the general direction of change, or strategy is formulated;then in the third step numbers of plans, varying on the stages of thedifferent technologies, are developed based on the strategy; andfinally is the managed change. Ref. [60] also proposes four-stepframework for restricting energy revolution as: first, categorize themany and diverse technologies according to their varied launchpaths; second, match launch paths to policy packages; third, identifythe institutional gaps, and finally fill in the gap. In our viewpoint, theformer is largely top-down while the latter is more bottom-up.Combining these two frameworks we propose an interactive frame-work for China’s power sector transition management as shown inFig. 6.

For the top-down line, a long-term vision for electricity inChina will be drafted first to guide electricity planning [71,72].The overall planning then in turn guides more practicable sectorplans and detailed implementations, for example, renewablegeneration planning for the next three decades, smart gridplanning and its stage by stage implementation, energy efficientbuilding programs, etc. On the bottom-up line, proper policypackages need be designed to support the implementation ofsector planning and programs. Whether the policy for a specificenergy technology is in the front end support or back endincentive and regulations depends upon the scientific technologypath appraisal based on the state-of-art technology and marketdevelopment. It should also be noticed that these designed policypackages, will in turn change the resource availability, basicscience advance and technology potential on one hand, landscapeand regime for energy, industry policy etc on the other hand,which in turn will exert new pressure and opportunity for theshaping of long-term vision.

According to the innovation theory, ‘front end support’, includ-ing research and development (R&D), prototyping and demon-stration (P&D), public–private partnerships (PPP), monetaryprizes for innovators, support for technical education and trainingis vital for supply-push innovation, while ‘back end support’,economic incentives and regulatory requirements or mandates toencourage innovation is vital for market-pull innovation. The backend economic incentive includes tax incentives and credits, loanguarantees and low-cost loans, price guarantees, governmentprocurement programs, new-product buy-down programs andgeneral and technology-specific intellectual property policies.On the back end regulation side, policy package includes govern-ment standards as appliance standards, energy technology (effi-ciency) standards in the building and construction sectors,regulatory mandates, such as renewable portfolio standards forutilities, fuel standards, fuel efficiency standards and emissiontaxes, etc. For all kinds of technology, there is an important rolefor the government to implement transitional R&D to overcome‘‘death valley’’ at different launch stages are necessary, on theother hand, there is also an substantial role for governmentsupported R&D to facilitate the secondary and incrementalinnovations (or the technology learning) in the manufacturingprocess.

Though the purpose of the paper is not a case-by-casetechnology appraisal and policy recommendations as done inthe previous work, here some technologies will be briefly dis-cussed to demonstrate how to design policy packages accordingto the state and nature of the specific technology. Five represen-tative technology/classifications are chosen in this section,namely large scale on-grid wind/solar, small off-grid wind/solardistributed generation, energy efficient building, CCS, and nucleartechnologies.

As analyzed in the Current power landscape and niche in Chinasection, from many perspectives, China has achieved great suc-cess in developing wind power from small scale off-grid nichesgradually into the mainstream power regime. However, there are

Resource availability, basic science advance, niche technology potential, etc

Long-term vision for low carbon electricity in China

Integrated Resource Strategic Planning for electricity [71-72]

Supply Demand

Generation mix Power Grid Industry process innova- Thermal Grid expansion tion conservation Hydropower Smart Grid energy efficient buildingNuclear Development conservation, green Renewable… plan lighting, appliances…

Economic & social landscape and scenario, general energy regime, industry policy, coordination with other sector policy as agriculture, water resource, land use, etc

Sector plans and detailed programs

Generation capacity plan and programs, renewables generation planning, Smart Grid development plan and programs, energy efficiency plan and programs in industry building and appliances…

Technology launch paths appraise for various options: solar, geothermal, fission, fusion, fuel cell/hydrogen, CCS…

Policy packages to facilitate transitions

front end support back end incentive back end regulation

Fig. 6. An interactive management framework for Power transition in China.

J. Yuan et al. / Renewable and Sustainable Energy Reviews 16 (2012) 5660–5677 5673

many obstacles preventing the acceleration of wind power anddeserving special attention for policy design. For solar powerbecause of the still high cost (PV or CSP) the generators have notincentive to install solar capacity. On the other hand, withoutsubstantial learning-by-doing, the cost will not go down in thelearning curve [73]. Because of solar is definitely the next mostpromising renewable technology and because low carbon transi-tion needs an ecosystem rather than one ultimate technology[74, p. 246], more front end R&D and P&D support for solar isneeded for its takeoff in China.

As argued before, to reduce supply cost as well as to developrenewable to the upper most, the optimum paths for renewablegeneration should include large-scale on-grid and small-scale off-grid generation. Considering the future reconfiguration scenarioof numerous renewable units in different sizes and differenttechnologies located almost everywhere, the government needsto work out the timetable and program for DG development.However, because of the potential competition with the twonational grid operators, the strongest opposition may come fromthem. Therefore government needs to formulate electricity pri-cing reform to separate the current jumbled electricity price intogeneration, transmission, distribution and retail prices. On theother hand, in some isolated area with convenient condition(i.e., with plenty of hydropower resources to serve as the backupfor renewables or with plenty of solar and wind resourcessimultaneously) may be chosen as experimentation and demon-stration for DG technology. Besides, DG should best be invested inby numerous private investors to reduce the heavy financialburden on the large incumbents. Fair investment environmentmust be shaped to attract private investors.

Many energy efficient building technologies are mature in acommercialization sense, but their implementation in China is

rare. Various sources have confirmed that buildings are a largeenergy consumer and carbon emitter and the current energyintensity in China’s buildings can be cut by a factor of 1/2 to 2/3and thus contributing a major proportion in energy conservation[75,76]. It is also worthwhile noticing that because of the lowturnover of houses, retrofitting of old houses is at least sameimportant as building more efficient new ones. Althoughimprovement on this scale is a dramatic challenge, the energyconservation opportunities are legion: the current availableoptions including high-efficient bulbs, daylighting and activelycontrolled window shading, highly insulated windows, pigmentsfor roofing and walls with high reflectivity and emissivity tominimize heat gain, heat pump and many others; the newerapproaches still need further R&D for passive systems includingLEDs, windows with controllable optical and thermal properties,new material for building shells with superior structural andinsulating properties and others. Adoption of these technologieswill inevitably result in additional cost to builders and home-owners. Unfortunately, the building sector is notoriously slow toadopt innovations, while both builders and purchasers of realestate are notorious for preferring low initial cost to minimumlife-cycle costs and thus for insisting on short payback periods oninvestment in conservation that raises initial prices but savesmoney in the long run. Demonstrations of energy-saving tech-nologies at a scale invested in by government may assist ineducating the market, including builders, service providers andconsumers. New appliance and lighting standards that fit tech-nology advances in these areas also require implementation.Lack of professionals is also a potential problem. Though energyservice in many industrialized countries has developed into anexpanding sector, their development in China is still immature.Creating incentives for the grid company, especially their urban

J. Yuan et al. / Renewable and Sustainable Energy Reviews 16 (2012) 5660–56775674

distribution affiliations to promote energy savings, instead ofsimply rewarding them for expanded power consumption, couldpromote the introduction. This will in turn call for the redefinitionof the function of the grid company, especially the division ofnatural monopoly aspects as power transmission and distributionand system operation and dispatch, with the competitive aspectsof power supply and energy services for reconfiguration of thepower grid in the future. Then SERC could be empowered to pushforward power market reform and implement more performance-based regulation on the natural monopoly sectors of the powersystem.

CCS is the leading mechanism offering the prospect of allowingcontinued use of coal while resolving coal’s profound CO2 emis-sion problem. Considering the coal-dominated primary energyand generation structure, CCS is the most promising technologyfor China. Globally Europe and the U.S. are leading in CCStechnology R&D. Currently there are about 100 CCS projects inoperation globally while less than 10 of them are implemented atlarge scale (Mt annually). However none of these projects canprovide an adequate level of assurance in storing very largequantities of CO2 over the long term without significant risk ofescape, especially given the scale of storage required: a 500 MWcoal power plant will generate a billion barrels of liquefied CO2

[77]. China’s CCS technology research is initiated by Ministry ofScience and Technology in 2007 and only three pilot projects aredelivered in China. A viable CCS technology would consist of threestages: separating the CO2 from utility and industry sources,transporting it to a storage site and isolating it from the atmo-sphere for hundreds of years until replacement alternativesevolve. Therefore CCS is still in its early research and demonstra-tion stage and major challenges are: (1) cutting the cost of CO2

capture, the current capture, transportation and storage process isestimated to increase the power generation cost by 50–100% inChina; (2) establishing scientific certainty regarding the securityof extremely long-term storage of CO2 in a geological formation atthe very large scale required; (3) developing the best practices foroperating storage fields long term; (4) developing a (global andnational) regulatory structure that would permit the introductionof CCS [78–80]. For large scale applications of CCS in China, morechallenges could be added: (5) providing the needed sites ofsubterranean structures appropriate for long-term carbon sto-rage; (6) building the vast infrastructure for CO2 transportation;and (7) providing the gigantic investment to meet the projectdeveloping requirements (China and India together needing 1.17trillion US$ into 2050 for capture facility alone [80]). Since CSSproject is pure cost for developers before new and large-scaleways of commercialization application of CO2 captured can besecured, the generators are unlikely to greet the huge costimposition of CCS with enthusiasm. Similarly, since the CO2

captured by CCS projects in one country is global public good atits own cost and without international legal framework, technol-ogy transfer and proper fund support from developed to devel-oping countries like China are unlikely to promote CCS withenthusiasm. However, the current international arrangements areunable to provide such incentives. Assuming that such mechan-ism effective in the future, to promote CSS, on the front end,perhaps in an international cooperation framework, basic R&D onmore efficient capture technology to reduce cost and increaseenergy efficiency, advanced subterranean structure siting andoperation technology, advanced transportation technology andperhaps commercialization usage of CO2 need to perform bydirect government investment or PPP mechanism. Research isalso required to describe, model, predict and monitor the path ofinjected CO2 in various geological formations and the hydrome-chanical, chemical and biogeochemical processes involved. Theearlier demonstration of CCS technology also needs government

investment and possible PPP mechanism. At C&P stage, back endmandates such as low carbon energy supply quota, compulsivetechnology standards for coal plants, a global carbon market andcarbon pricing mechanism etc is needed. Also, back end incen-tives such as government subsidies, PPP, tax credit and CDMmechanisms are needed to provide the necessary incentives.

Nuclear power has been actively researched and developed inChina, although China is largely a late-comer in nuclear industry.The current most advanced nuclear technology, AP1000 wasintroduced in China in 2007 and the current units under construc-tion are mostly third generation technology, which offers betterfuel technology and passive safety so that the reactors shut downwithout operator intervention in case of an accident. In 2001 Chinaalso participates in the fourth generation (GIF) project, whichpromised to provide the next generation nuclear technology forsustainable energy generation, minimize the nuclear waste, offerlife-cycle cost advantage over other energy sources and have moresafety and reliability in operations [81]. Six next generationsystems, including Sodium-cooled Fast Reactor (SFR), Very HighTemperature Reactor (VHTR), Super-Critical Water-cooled Reactor(SCWR), Gas-cooled Fast Reactor (GFR), Lead-cooled Fast Reactor(LFR) and Molten Salt Reactor (MSR) are under R&D by GIF, amongwhich VHTR could be used for hydrogen generation and thus couldprovide a promising position for nuclear power in the futurehydrogen economy. Recognizing the recent serious accident inJapan, a more collaborative international partnerships to dissemi-nate best practices on design, operation and disposal of radioactivewaste is needed for global sustainable of nuclear. Realizing the fastgrowing of nuclear power in China on one side and shortage ofproprietary intellectual property rights on nuclear technology onthe other side, on the front end, China needs to advance R&D withmore active participation with international partners, while on theback end, needs to promote P&D for new technology with PPP andtax credit incentives, provide favorable policy for investment innon-fossil energy, promote standardized design practices anddomestic manufacturing by technology standard and favorableindustry policy, and especially importantly, provide legal mandatefor safety operation. (See Table 9 for a summarization of theanalysis in this section.)

5.3. Potential institutional gaps for transitions

According to innovation organization theory, institution playsvital role for coping with ‘‘death valley’’ in the different stages ofinnovation. The following analysis also reveals that some institu-tional gaps should be filled for better delivering low carbontransition of China’s power sector:

A government body to work out integrated energy strategy,sector plan and detailed programs. Considering the complexity oftransition, the current energy institution framework on centralgovernment level is deficient and a well-functioning legal frame-work for electricity sector jurisdiction and decision-making isneeded [31]. At least, before a ministry in charge of energystrategy and policy can be set up, the National Energy Adminis-tration resided with State Development and Reform Commissionshould be authorized to work out comprehensive energy andpower planning.

Gradual redefinition on the functions of the grid company andpossible reformation according to the transition process. Gridcompany plays vital role in the power system transition. Integra-tion of renewable generation in large scales requires the relatedT&D system expansion and investment, revised dispatch rules aswell as advanced operation technology; DG with various kinds ofrenewable technology requires the possible reconfiguration of thecurrently centralized power systems into multi-level counter-parts; the various customer side conservation options require

Table 9Policy packages for power system transition and illustrations.

Technology launch path Research and development Prototyping anddemonstration

Investment andengineering

Commercializationand popularization

Large scaledelivering

Policy type/representative

technology analysis

macro-policies, carbon charge, resource tax, level playing field policy in both technology and investor sense

Consistent policy overview, transitional and technology learning R&D support

Front end Back end

National basic research activity;

technical education and training;

P&D by government fund; PPP;

SOE direct investment

PPP; Loan guarantee and low

cost loan; Tax credit

Incentive policyDemand side technologies:

customer education/information;

purchase subsidy; new-product buy

down program

Supply side technologies: price

guarantee; government

procurement; intellectual property

policies; grid investment and cost

allocation policy for renewable in-

access

Mandate: government standards as

appliance standards, energy

technology (efficiency) standards;

regulatory mandates as renewable

portfolio standard, SOE direct

investment, fuel standards, fuel

efficiency standards and emission

taxes

Large scale wind/

solar project

R&D support: large capacity and efficient wind turbine; wind technology at low wind speed; breakthrough in blade material; breakthrough

in CSP and other advanced solar technology

P&D support: demonstration of new technology

I&E support: policy supporting domestic manufacturing; PPP in technology transfer; low cost loan or tax credit for renewable manufacturers

C&P support: integration plan of generation mix and power grid; renewable generation portfolio requirement for generators; grid-access

requirement of grid operators; T&D system investment incentive for grid operator and cost allocation policy; favorable dispatch policy for

renewable; Feed-in price based on learning curve

Small scale wind/solar

distributed generation

projects

P&D support: demonstration for DG

C&P support: regulatory mandates and technology standards for DG; clear generation, transmission, distribution and retail pricing

mechanism; fair investment environment encouraging small investors

Energy efficient building R&D support: transitional R&D on energy efficient building; training of professionals

P&D support: demonstration of new energy efficient building technology

C&P support: building code; appliance and lighting technology standard; new product price buy down policy; subsidy for house-owner to

house retrofitting; requirement on grid operators to provide energy management services

CCS R&D support: basic R&D on CCS technology; transitional R&D to decrease cost

P&D support: demonstration of promising CCS technology in power plant; direct SOE incumbent generators investment

C&P support: global carbon pricing mechanism; technology and fund support from developed to developing countries; compulsory

technology standard; low carbon energy supply quota; tax credit and low cost loan; CDM mechanism

Nuclear power R&D support: basic R&D on GIF nuclear and fusion technology

P&D support: demonstration of proved new nuclear technology; direct SOE incumbent generators investment;

C&P support: favorable investment policy for none-fossil energy; domestic manufacturing policy; standardized design practice; legal

mandate for safety operation

J. Yuan et al. / Renewable and Sustainable Energy Reviews 16 (2012) 5660–5677 5675

redefinition on the role of utilities as a energy service providerinstead the current power supplier. At appropriate timing, dis-assembly of the current national grid company into NationalTransmission Company, National System Operator (both physicalinfrastructure and market) and Provincial Distribution Companyis necessary to facilitate the transition. However, providing theproper incentive to the incumbents without distorting the transi-tion is proven difficult and currently there is no silver bullet evenconsidering the worldwide power deregulation experiences.

An energy R&D body as well as industry-government consortiato provide integrated translation research and strong front-endsupport. Given the need for energy technology breakthroughs inthe future, organized basic R&D as well as transitional innovationprocess to translate science breakthroughs into technology devel-opment is vital for crossing the ‘‘valley of death’’ in the innovationprocess. The capability of organizing the best university research-ers with outstanding firms on technology R&D collaboration is thekey function of this body.

A public corporation to provide Demonstration and Engineer-ing and manufacturing process innovation financing support.In addition to translational R&D, there is a need for demonstra-tions of engineering-intensive technologies that commercial

sector has no strong incentive to carry out on its own. Govern-ment cost sharing can be appropriate for the demonstration ofnew technology that works well at laboratory and pilot scales butrequires expensive and risky demonstration at full scale. Demon-stration assumed by private sectors with a cost sharing for suchprojects can help ensure private-sector discipline and a private-sector stake in the demonstration. Also, most new energy tech-nologies must compete on price more or less from the beginning.It is thus essential to speed the expansion of manufacturingcapacity in order to take advantage of economies of scale andlower unit costs. Therefore, a public corporation with privatesector expertise and operating in an environment comparable tothat of a commercial firm can be a mechanism to sponsor thedemonstration and manufacturing promotion program.

A roadmapping thinktank to develop and update innovationroadmap. A coordinated effort between the public and privatesectors can optimize the government’s role in identifying andaddressing the most promising opportunities to overcome marketfailure. Thus a thinktank that could combine industrial, govern-ment and academic expertise to assess technologies, identifyareas of needed precompetitive research and likely launch obsta-cles and then recommend appropriate policies and incentives to

J. Yuan et al. / Renewable and Sustainable Energy Reviews 16 (2012) 5660–56775676

facilitate deployment is needed for the transition. Especially inChina, without unified ministry in charge of energy issue, thethinktank could serve as a policy and technology developmentcoordination mechanism of the initiatives and programs spon-sored by different ministries.

6. Concluding remarks

Recognizing the urgency and magnitude of low carbon transi-tion in China, this paper employs the recent progress in multi-perspective socio-technical transition theory to study China’spower sector. The paper has set out the theoretical and metho-dological basis for the specification of outline transition pathwaysto a low carbon power system in China. This has been exemplifiedby a brief discussion of the current power landscape, regime andtechnology niches, and the pressures on the regime from macro-scopic social-economic transition during the accelerated indus-trialization, urbanization and modernization process, and thepossible transition pathways. By incorporating the viewpoints ofinnovation theory, we also propose an interactive transitionmanagement framework consisting of a top-down line as visionguidance, integrated planning formulation and sector planningand detailed program implementation, a bottom-up line as policypackage design based on case-by-case technology launch pathappraisal to support sector planning and program implementa-tion, and a central role on the policy package design due to itsfeedback effect on macroscopic landscape variables and then intothe long-term vision. We argue that our approach both contri-butes to theoretical and methodological debates on specifyingtransition pathways, and will be useful in informing policy-makers and other stakeholders. The theoretical contributionrelates to the integration of recent ideas on transition processinto an integrated multi-level perspective of landscape, regimeand niches. We argue that this will provide a richer analyticalbasis for the development of transition pathways than was thecase for previous work on socio-technical scenarios. The policy-relevant contribution relates to the integration of innovationtheory into the specification and management of these pathwaysand the institution capability build to fill the gaps. We argue thatthis will go beyond much recent work on China energy scenariosthat have largely focused on technically plausible futures.

Regarding China’s power sector transition to a low carbonfuture, the following points are extracted to conclude the paper:

�

A clear energy development strategy and scenario is neededfor guiding the power sector development. � Integrated planning, covering both generation and grid infra-

structure, considering not only physical power plant but also‘‘efficiency power plant’’ from demand-side into should bedrafted to guide low-level power development plans andprograms.

� Looking into 2020, the most promising pathways are transfor-

mation including mostly demand-side options, substitutionpathways including current mature or would-be matureoptions as wind, solar, gas and nuclear power, and reproduc-tion pathways including CHP and UVC to increase energyefficiency; looking into 2030 and beyond, more options asGIF nuclear, numerous DG technologies and fuel cells etc willadd to the substitution list and will begin to graduallyreconfigure the landscape of the power system into compli-cated multi-nesting structures (and hence guiding the direc-tion of power grid development).

� Strong power grid infrastructure is needed to deliver the low

carbon transition. In the future the power grid should be ableto assume the following functions in China: optimize the

primary energy supply structure and facilitate the grid accessof large-scale clean generation, and thus reconfiguration ofdistribution system and intelligent distributed generationtechnology are needed; serve as an alternative system besidesrailway and road systems for large-scale energy transportationand thus higher voltage transmission system with longertransmission radius will be needed; promote energy conserva-tion on power demand side and also on generation andtransmission sides and thus more consumer choices, custo-mized power services and smart energy management will beneeded. All these functions call for the power grid technologyinnovations in both hardware and software fields.

Acknowledgements

The authors would like to appreciate the insightful commentsof the anonymous reviewer and the kind help of the Editor, whichsignificantly enhance the quality of the paper. The work reportedin the paper is funded by the Ministry of Education of China(10YJC790360), National Science Foundation of China (71173075),the Fundamental Research Funds for the Central Universities,Natural Science Foundation of Beijing (9092013) and BeijingPlanning Project of Philosophy and Social Science (10BaJG371).The usual caveats apply.

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